Analysis of information sources in references of the Wikipedia article "Subprime mortgage crisis" in English language version.
Securities issued by Fannie Mae and Freddie Mac are also guarantee ... the timely payment of all principal and interest of the mortgage-backed securities they issue. Although their guarantee doesn't carry the weight of the U.S. government, Freddie Mac and Fannie Mae are two of the most fiscally sound corporations in America. Their mortgage-backed securities are considered to be the equivalent of AAA-rated corporate bonds. They have never defaulted on a mortgage-backed security.
After the REMIC battle, [whatever that was] Wall Street realized it was never going to dislodge Fannie and Freddie from their dominant position as the securitizers of traditional mortgages. ... Wall Street would have to find some other mortgage product to securitize, products that Fannie and Feddie couldn't – or wouldn't – touch. .... 'Their effort became one to find products they could profit from where they didn't have to compete with Fannie.'
[Example from page 118] UBS banker Rovert Morelli, upon hearing that S&P might be revising its RMSBS ratings, sent an e-mail to an S&P analyst. 'Heard your ratings could be 5 notches back of moddys [sic] equivalent, Gonna kill you resi biz. May force us to do moddyfitch only ...'
the "smartest" analysts at the credit rating agencies "leave for Wall Street firms where they could use their knowledge (of criteria used to rate securities) to manipulate the companies they used to work for."
big short.
In the post-war period, falling home prices were rare. From 1945 to 2006, nominal home prices never fell on the national level, at least not significantly. Some argue that there was a drop of 1 percent in 1963 and 1990; there were regional drops such as in California in the early 1990s. But a 25–30% drop in the national average just wasn't part of the historical record. Consequently, models used to price mortgage portfolios under-weighted scenarios with large price declines.
{{cite web}}: CS1 maint: multiple names: authors list (link){{cite web}}: CS1 maint: multiple names: authors list (link)In response to a slump in demand for their bonds, financial firms, which have incurred $504 billion of writedowns and credit losses since the start of 2007, are selling assets such as mortgage securities and collateralized debt obligations at fire- sale prices to pay down looming maturities.
Without those AAA ratings, the gold standard for debt, banks, insurance companies and pension funds wouldn't have bought the products. Bank writedowns and losses on the investments totaling $523.3 billion led to the collapse or disappearance of Bear Stearns Cos., Lehman Brothers Holdings Inc. and Merrill Lynch & Co. and compelled the Bush administration to propose buying $700 billion of bad debt from distressed financial institutions.
Most home mortgages were relatively safe investments, and Fannie and Freddie's lending standards were conservative. In the main, the GSEs bought and guaranteed loans with sizeable down payments, typically 20%, for borrowers who could be expected, based on their incomes and credit histories, to meet their monthly mortgage payments with little difficulty. By regulation, the GSEs were not allowed to deal in mortgages above a given amount ($417,000 in 2007, before the crisis). Private lenders, therefore, were left with both the larger and the riskier mortgages, all of which were called "non-conforming" loans because they didn't fit the GSEs' criteria. The GSEs seemed to have a lock on the "conforming" market, the bigger, safer part of the mortgage business.
The mortgage debacle, ... was simply one manifestation, ... of a climate that made foolish practices seem sensible. A broad underestimation of risk rested on self-serving assumptions. It was, for example, widely assumed that home prices would always rise, meaning that if borrowers defaulted lenders would be protected against heavy losses. This was one reason why Standard & Poor's and Moody's gave mortgage-related securities high ratings.
[Between Q3 2007 and Q2 2008, rating agencies lowered the credit ratings on $1.9 trillion in mortgage-backed securities ]
Investors, including public pension funds and foreign banks, lost hundreds of billions of dollars, and have since filed dozens of lawsuits against the agencies.
Despite a barrage of criticism over their behavior, the three firms issued 97 percent of all ratings in the 12 months that ended in June 2011, according to the SEC's most recent publicly available data.
Some banks were so concerned that they considered stopping trading with Merrill if Lehman went under, according to participants in the Federal Reserve's weekend meetings on Sept. 13 and 14 [2008].
the disappointing results [of the actions of the Federal Reserve] show the limits of the central bank's ability to lift the nation from its economic malaise.
Credit spreads declined not just for housing, but also for other asset classes like commercial real estate. This tells us to look to the credit bubble as an essential cause of the U.S. housing bubble. It also tells us that problems with U.S. housing policy or markets do not by themselves explain the U.S. housing bubble.
Most home mortgages were relatively safe investments, and Fannie and Freddie's lending standards were conservative. In the main, the GSEs bought and guaranteed loans with sizeable down payments, typically 20%, for borrowers who could be expected, based on their incomes and credit histories, to meet their monthly mortgage payments with little difficulty. By regulation, the GSEs were not allowed to deal in mortgages above a given amount ($417,000 in 2007, before the crisis). Private lenders, therefore, were left with both the larger and the riskier mortgages, all of which were called "non-conforming" loans because they didn't fit the GSEs' criteria. The GSEs seemed to have a lock on the "conforming" market, the bigger, safer part of the mortgage business.
The mortgage debacle, ... was simply one manifestation, ... of a climate that made foolish practices seem sensible. A broad underestimation of risk rested on self-serving assumptions. It was, for example, widely assumed that home prices would always rise, meaning that if borrowers defaulted lenders would be protected against heavy losses. This was one reason why Standard & Poor's and Moody's gave mortgage-related securities high ratings.
In response to a slump in demand for their bonds, financial firms, which have incurred $504 billion of writedowns and credit losses since the start of 2007, are selling assets such as mortgage securities and collateralized debt obligations at fire- sale prices to pay down looming maturities.
Despite a barrage of criticism over their behavior, the three firms issued 97 percent of all ratings in the 12 months that ended in June 2011, according to the SEC's most recent publicly available data.
{{cite web}}: CS1 maint: multiple names: authors list (link)the disappointing results [of the actions of the Federal Reserve] show the limits of the central bank's ability to lift the nation from its economic malaise.